The domestic capital goods sector is forecast to experience 5 percent to 10 percent year-over-year revenue growth for the remainder of 2005 and for 2006, according to Standard & Poor’s Ratings Services. The increase will be spurred by hurricane cleanup and rebuilding activities and continued U.S. economic growth.
“Despite continued economic growth and favorable near-term prospects as companies’ earnings and cash flow strengthen, however, there is still long-term pressure on credit quality for capital goods companies,” said S&P’s credit analyst Daniel DiSenso.
Of the 111 rated U.S. capital goods companies, 70 percent have high financial risk profiles and speculative-grade credit ratings, S&P said. Standard & Poor’s expects improvements in credit card quality to be restricted, in part because of firms taking advantage of high capital market liquidity to undertake debt-financed acquisitions or to extract dividends.
